BILL NUMBER: SB 1959	CHAPTERED  09/29/00

	CHAPTER   892
	FILED WITH SECRETARY OF STATE   SEPTEMBER 29, 2000
	APPROVED BY GOVERNOR   SEPTEMBER 28, 2000
	PASSED THE SENATE   AUGUST 30, 2000
	PASSED THE ASSEMBLY   AUGUST 28, 2000
	AMENDED IN ASSEMBLY   AUGUST 25, 2000
	AMENDED IN ASSEMBLY   AUGUST 8, 2000
	AMENDED IN SENATE   MAY 8, 2000

INTRODUCED BY   Senator Lewis

                        FEBRUARY 25, 2000

   An act to amend Sections 11690, 11699, and 11715 of, and to add
Section 11690.5 to, the Insurance Code, relating to workers'
compensation insurance.



	LEGISLATIVE COUNSEL'S DIGEST


   SB 1959, Lewis.  Workers' compensation insurance:  reinsurance
bonds.
   Existing law provides for the regulation of insurers by the
Insurance Commissioner.  Existing law provides that every insurer
desiring to reinsure the injury, disablement, or death portions of
policies of workers' compensation insurance under the class of
disability insurance shall maintain on file with the commissioner a
bond, or a cash deposit in lieu of a bond, in favor of the
commissioner as trustee for the beneficiaries of awards of
compensation against the insurer, to the extent of that reinsurance.
Existing law requires that the amount of the bond be based on the
aggregate of the present values at 6% interest of determined and
estimated future payments upon compensation claims.
   This bill would require an insurer or reinsurer desiring to have
the ability to undertake that reinsurance to notify the commissioner
of its intent to do so, and would impose a late fee for a failure to
notify the commissioner.  This bill would require the commissioner to
establish a list of all insurers or reinsurers authorized to
undertake that reinsurance, as specified.  The bill would provide
that if the reinsurer fails to maintain a bond or cash deposit as
required, the commissioner may disallow all or a portion of any
reserve credits claimed by the ceding insurers.  This bill would also
allow the computation of the amount of the bond to be based either
on the aggregate of the present values at 6% interest or at the rate
of the reinsurance company's investment yield as determined by the
NAIC Insurance Regulatory System Ratio Number 5 for Property and
Casualty Companies, whichever is lower, of determined and estimated
future payments upon compensation claims, as specified.  This bill
would state it is not to be construed to alter or affect the deposit
obligations of former self-insured employers as provided in a
specified provision of the Labor Code.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:


  SECTION 1.  Section 11690 of the Insurance Code is amended to read:

   11690.  Except in the case of the State Compensation Insurance
Fund or as provided by Section 11715, every insurer desiring
admission for workers' compensation insurance, or desiring to
reinsure the injury, disablement, or death portions of policies of
workers' compensation insurance under the class of disability
insurance, shall, as a prerequisite to admission, or ability to
reinsure the injury, disablement, or death portions of policies of
workers' compensation insurance under the class of disability
insurance, maintain on file in the office of the commissioner a bond
in favor of the commissioner as trustee for the beneficiaries of
awards of compensation against the insurer, or against any other
insurer upon a policy reinsured by that insurer, to the extent of
that reinsurance.  Every insurer or reinsurer desiring to have the
ability to reinsure the injury, disablement, or death portions of
policies of workers' compensation insurance under the class of
disability insurance shall notify the commissioner, in the manner and
form prescribed by the commissioner, of its intent to reinsure that
insurance.  In addition, a late filing fee shall be imposed on the
reinsurer pursuant to Section 924 for a failure to notify the
commissioner of its intent to reinsure the workers' compensation
insurance.
  SEC. 2.  Section 11690.5 is added to the Insurance Code, to read:
   11690.5.  The commissioner shall establish a list of all insurers
or reinsurers authorized to reinsure the injury, disablement, or
death portions of policies of workers' compensation insurance under
the class of disability insurance.  An insurer or reinsurer shall be
authorized to reinsure the injury, disablement, or death portions of
policies of workers' compensation insurance under the class of
disability insurance if it has complied with Section 11690.  The
commissioner shall publish a master list of those insurers or
reinsurers at least semiannually.  Any insurer or reinsurer providing
the notification and deposit required by Section 11690 shall be
added by addendum to the list at the time of approval, and shall be
incorporated into the master list at the next date of publication.
The list and addenda required by this section shall be published so
that they are readily accessible to insurers and producers.  The list
and addenda required by this section shall also contain a notice
that if an insurer enters into a contract of reinsurance with an
insurer or reinsurer reinsuring the injury, disablement, or death
portions of policies of workers' compensation insurance under the
class of disability insurance that is not authorized pursuant to this
section, the ceding insurer may not be able to claim that
reinsurance for reserve credit.
  SEC. 3.  Section 11699 of the Insurance Code is amended to read:
   11699.  The bond shall be in an amount:
   (a) Not less than the sum of the following amounts computed, less
credits and deductions allowable with respect to reinsurance in
admitted insurers, as of the close of the last preceding December
31st in respect to workers' compensation insurance written subject to
the workers' compensation laws of this state:
   (1) The aggregate of the present values at 6-percent interest, or
at the rate of the company's investment yield as determined by the
NAIC Insurance Regulatory Information System Ratio Number 5 for
Property and Casualty Companies, whichever is lower, of the
determined and estimated future payments upon compensation claims not
included in paragraph (2), including in those claims both benefits
and loss expenses.
   (2) The aggregate of the amounts computed as follows: For each of
the preceding three years, 65 percent of the earned compensation
premiums for that year less all loss and loss expense payments made
upon claims incurred in the corresponding year from that 65 percent;
except that the amount for each year shall not be less than the
present value at 6-percent interest of the determined and the
estimated unpaid claims incurred in that year, including both
benefits and loss expenses.
   (b) Not less than one hundred thousand dollars ($100,000).
   (c) If the aggregate amount computed under subdivision (a) exceeds
fifty thousand dollars ($50,000), not more than double the aggregate
amount.
  SEC. 4.  Section 11715 of the Insurance Code is amended to read:
   11715.  (a) Any workers' compensation insurer, or insurer that
reinsures the injury, disablement, or death portions of policies of
workers' compensation insurance under the class of disability
insurance, may, in lieu of and for the same purpose as the bond
required by Section 11690, and upon payment of the fee prescribed in
this article, deposit cash instruments, approved letters of credit,
or approved interest-bearing securities or approved stocks readily
convertible into cash, investment certificates or share accounts
issued by a savings and loan association doing business in this state
and insured by the Federal Deposit Insurance Corporation,
certificates of deposit or savings deposits in a bank licensed to do
business in this state, or approved securities registered with a
qualified depository located in a reciprocal state as defined in
Section 1104.9.  The deposit shall be made from time to time as
demanded by the commissioner and may be made with the Treasurer, or a
bank or savings and loan association authorized to engage in the
trust business pursuant to Division 1 (commencing with Section 99) or
Division 2 (commencing with Section 5000) of the Financial Code, or
a trust company.  A deposit of securities registered with a qualified
depository located in a reciprocal state as defined in Section
1104.9 may only be made in a bank licensed to do business and located
in this state that is a qualified custodian as defined in paragraph
(1) of subdivision (a) of Section 1104.9 and that maintains deposits
of at least seven hundred fifty million dollars ($750,000,000).  The
deposit shall be made subject to the approval of the commissioner
under those rules and regulations that he or she shall promulgate.
The deposit shall be maintained at a deposit value of not less than
twenty-five thousand dollars ($25,000), nor less than the reserves
required of the insurer to be maintained under any of the provisions
of Article 1 (commencing with Section 11550) of Chapter 1 of Part 3
of Division 2, relating to loss reserves on workers' compensation
business of the insurer in this state, nor less than the sum of the
amounts specified in subdivision (a) of Section 11699.
   (b) Any workers' compensation insurer electing to bring itself
within the provisions of subdivision (a) by submitting securities,
stock, investment certificates, or share deposits registered in a
depositor's name, shall execute a trust agreement in a form approved
by the commissioner between the insurer, the institution in which the
deposit is made or, where applicable, the qualified custodian of the
deposit, and the commissioner, that grants to the commissioner the
authority to withdraw the deposit as set forth in Section 11716.  The
insurer shall also execute and deliver in duplicate to the
commissioner a power of attorney in favor of the commissioner for the
purposes specified in Section 11690, supported by a resolution of
the depositor's board of directors.  The power of attorney and
director's resolution shall be on forms approved by the commissioner,
shall provide that the power of attorney cannot be revoked or
withdrawn without the consent of the commissioner, and shall be
acknowledged as required by law.
   (c) The commissioner shall require payment of one hundred
seventy-seven dollars ($177) in advance as a fee for the initial
filing and the first semiannual review of each letter of credit
specified in subdivision (a).  In addition, each workers'
compensation insurer depositing a letter of credit shall pay an
annual fee of one hundred eighteen dollars ($118) in advance on
account of the letter until its expiration or revocation.  This fee
shall be for annual periods commencing each January 1 and shall be
due and payable on the following April 1.
   (d) The commissioner shall require payment of one hundred eighteen
dollars ($118) in advance as a fee for the initial filing of a trust
agreement with a bank, savings and loan association, or trust
company on deposits made pursuant to subdivision (a).  An additional
fee of one hundred eighteen dollars ($118) shall be payable for each
amendment, supplement, or other change to the deposit agreement.  In
addition, the commissioner shall require the payment of fifty-eight
dollars ($58) in advance for receiving and processing deposit
schedules pursuant to this section.  An additional fee of twenty-nine
dollars ($29) shall be payable for each withdrawal, substitution, or
any other change in the deposit.
   (e) Any workers' compensation insurer that elects to deposit cash
or cash equivalents pursuant to this section shall be entitled to a
prompt refund of those deposits in excess of the amount determined by
the commissioner pursuant to subdivision (a).  The commissioner
shall cause to be refunded any deposits determined by the
commissioner to be in excess of the amount required by subdivision
(a) within 30 days of that determination.  In the alternative, an
insurer may use any excess deposit funds to offset a demand by the
commissioner to increase its deposit due to the failure of a
reinsurer to post a bond or deposit pursuant to Section 11690.
   (f) If a reinsurer has not maintained a bond as required by
Section 11690, or has not maintained deposits as required by
subdivision (a), or a combination thereof, in amounts equal to the
amounts of deposit credits claimed by its ceding insurers, the
commissioner, after notifying the insurer and its ceding insurers of
the deposit shortfall and allowing 45 days from the date of the
notice for the deposit shortfall to be corrected, may disallow all or
a portion of the reserve credits claimed by the ceding insurers.
  SEC. 5.  Nothing in this act shall be construed to alter or affect
the deposit obligations required by Section 3702.8 of the Labor Code.
